Changes eyed for second power auction

A second power auction that could determine rates paid by millions of Illinois electric customers is now a little more than six months away.

Tim Landis

A second power auction that could determine rates paid by millions of Illinois electric customers is now a little more than six months away.

Electric bills that shot up with the expiration of a 10-year rate freeze that expired Jan. 1 — especially for all-electric, residential customers — were based primarily on a wholesale auction of power supplies for Ameren and Commonwealth Edison customers last fall.

Now, regulators are getting ready for a January 2008 auction, though this time only one-third of supplies will go to market. The resulting electric rates for customers who have not switched to alternate suppliers would take effect in June 2008.

“The first time they bid the entire power supply,” said Illinois Commerce Commission spokeswoman Beth Bosch.

A specific date for next year’s auction has not been set.

Residential electric rates jumped 40 percent to 50 percent in some cases after the first wholesale power auction last September. Illinois used a “reverse auction” that required power marketers to submit progressively lower bids for the amount of electricity needed to supply Ameren and ComEd customers.

The cost of wholesale power accounts for about two-thirds of the typical monthly bill, while delivery costs, meter charges and taxes account for the remainder.

Subsequent, annual auctions, including in January, will be for one-third of the power supplies of Ameren and ComEd. New power-purchasing contracts also will be for three years, rather than the 18 months of the first auction, said Bosch.

As a result, rate changes should not be as dramatic, said Bosch.

“The idea is to smooth out some of the volatility in the wholesale markets,” she said.

The auction process also faces numerous legal and regulatory challenges, including from Illinois Attorney General Lisa Madigan and consumer groups such as the Citizens Utility Board in Chicago, who claim the first auction drove record corporate profits for Ameren and ComEd at the expense of consumers.

“I’d be very surprised if the auction survives in its present form,” said CUB executive director David Kolata, adding that the group is lobbying legislators to include auction changes in any rate-relief package, but that the organization has not recommended a specific alternative.

“It’s clear that what we have now is not really working. We need a hybrid system with stronger state oversight to protect consumers,” he said.

Madigan filed a complaint in March with the Federal Regulatory Energy Commission alleging 15 power suppliers who participated in last year’s auction colluded to artificially drive up wholesale power costs.

She also asked federal regulators to overturn the results of the auction.

Power suppliers, including AmerenEnergy Marketing, filed motions in the last week to dismiss the complaint, said FERC spokeswoman Mary O’Driscoll.

“The commission could act on the complaint or do any number of things,” said O’Driscoll, who added that no deadlines have been made for a decision.